Five things to note on payroll day

1. The BOE kitchen sinks it. Well, Carney evidently felt obliged to make up for lost time, as the Old Lady unveiled a "comprehensive package of measures" to ward off the economic impact of the Brexit. And look, it's worked: the BOE doesn't even forecast a recession for the UK. (This, of course, is akin to grading your own exams at school; naturally you're going to give yourself an A!) The market reaction was fairly predictable, with sterling and Gilt yields tumbling while the FTSE did a ripper. While the decision to purchase corporate bonds was an interesting twist, as many have observed that GBP 10 bio over the next year and a half or so pales in comparison to the EUR 10 bio that the ECB purchases per month. (Admittedly, the UK market is pretty small at GBP 150 billion of eligible securities, so that's still a decent chunk.)

While Carney admitted in the press conference that there likely would be a level for sterling that would curb the BOE's impulse to do more easing, that the majority of the committee envisages taking rates lower suggests that we aren't particularly close to it yet.

Perhaps the cleverest thing that the BOE did was to exclude central bank reserves from the leverage ratio calculation of UK banks. This should help ensure that there is no crowding out of private sector activity from the accumulation of reserves thanks to the various purchase and lending programs. Indeed, carney was quite vocal that he expects banks to pass on this rate cut in full.

While Macro Man sticks to his view that monetary policy will not be not a particularly potent driver for sterling in the medium term, the very least you can say about yesterday's package of measures is that they offered little cause for a short squeeze. The trend remains down.

2. Will the policy be effective? A 25 bp improvement in outstanding mortgage and business loan rates will be a windfall for borrowers, though it remains to be seen whether it will entice more fresh demand for credit. After all, the evidence from the rest of the world is generally pretty ample that the price of money is not the biggest impediment to borrowing activity. Macro Man had to laugh when he saw that the Bank had done QE to help move Gilt yields in a way that would spur economic activity. Ummm....if the past few months haven't done it, what's 60 billion quid of purchases going to do?

3. At least Carney talked sense on negative interest rates. He couldn't have been more...well...negative on the idea. Of course, the MPC is theoretically a democracy, so Carney perhaps didn't have the right to speak for the committee as a whole. Then again, it's the Governor who submits the policy proposal for a vote within the MPC, so Carney can ensure that NIRP doesn't even get a look-in. Macro Man giggled a bit to himself when Bloomberg TV trotted out Adam Posen, who bemoaned the lack of NIRP and claimed that it would work better than in Italy or Japan. This was the equivalent of saying that pork scratchings confer greater nutritional benefits than deep fried Mars bars.

4. Macro Man's payroll model is bearish...again. Although many of the constituent indicators improved this month, a few did not; in any case, several key inputs remain at levels consistent with very tepid job growth, despite the low level of claims. This month the model looks for private sector job gains of 118k, well below the consensus reading of 170k or so. Last month's model forecast miss was the largest since November of 2009; previous large misses have generally seen a surprise (relative to the model) in the other direction the following month, which would actually suggest downside risk to the forecast. Macro Man isn't quite prepared to take that at face value, but would definitely take the "under" versus the consensus forecast.

5. Macro Man is on holiday next week. This is possibly the most important piece of information that he can give you. Let's take a brief tour of some of Macro Man's previous holidays:

- August 2007: The start of the financial crisis as money markets erupt and quant models everywhere implode.

- August 2008: Russia invades Georgia, and the EUR reaches a top/USD reaches a low

- September 2008: TARP is announced as Macro Man is enjoying a cheeky long weekend in Madrid

- July 2011: Italy becomes embroiled in what had heretofore been a crisis focused on Greece, Portugal, and Ireland

After BOJ doubled rate of ETF purchases "it will be difficult for investors to profit by shorting stocks" - Daiwa

Good to hear. Annoys the hell out of me when people start shorting stocks, rioting against police and engaging in other unpatriotic acts. Thank goodness central banks are protecting honest citizens and fighting back!

With such a large upside prior month you'd be brave to take anything other than a corresponding under this month.Meanwhile, post BOE £ took one ,BUT let's see if there is actually any follow through in this crowded market. We've seen this show before with a dump and then lo the market doesn't behave (thinking Yen). I wondered after the Japanese policy misfired on weakness if we had reached a point where markets were more inclined to see policy moves has zero sum events given they seem to trigger similar responses from most of the majors. The latter even in the Feds case of simply backing off and talking dovish.I note £/$ is still comfortably in the consolidation range from the last big move from the 1.40's and has to cleanly break 1.275 to make a continuance. Meanwhile on the weeklies you'd normally be wanting to be a buyer not a seller of such a pattern.On the £ I still don't like it for any strategic move as opposed to tactical play.

What does MM's model have for NFP today? LB's random number generator has +205k. Anyone else interested in playing BLS bingo this morning?

Equity markets can (and often do) do this interesting thing occasionally, btw, when they have been rising on low volume. They can actually "sell off", whatever the number is, b/c there are no new buyers or there is no reason to buy. Hence Sell the News… with some kind of invented narrative slapped on it by the media.("Stocks sold off on Wall Street today after a report of a rare Chinese butterfly sighting in Beijing raised investor concerns").

Tsk tsk now now macro man no one likes a braggart..we all know you are 007 in disguise..no need to advertise you are hatching some dastardly plan to rule the world when you are on holiday..have a good break!

Pardon for the grammatical error. It's been a long time since I spoke french regularly, even longer since I wrote it regularly, and in 'Uhmerca there's little opportunity for casual exposure to writen French...so I plumb forgot my tout/tous grammar. Mea culpa.

Mea culpa as well for the model, which blew it again. It will be interesting to observe how the Fed "data dependence" themselves out of doing anything next month....maybe Burmese industrial inventories will be too high, warranting caution, or some other such nonsense...

Fed's targets for core cpi, unemployment, and real gdp/potential have all been exceeded.Bank loans to non-financials have been running 8% for almost 4 quarters now.Atlanta Fed GDPNow was 3.7% before this report.

nice call on FX LB. Cad numbers didnt help either. Risk rally in equities. .Financials/Utility correlation still working with I guess interst rates being the driver.. though staples doing well also, so I am guessing inflation isnt a concern. Tech loving it, Ndx up 15% from Brexit lows. wow!

from CLSA survey on Chinese wages

Average wage growth for unskilled factory workers slowed from 6.2%YoY in 2Q15 to3.8%YoY in 2Q16, while wage growth for skilled/managerial workers slowed from 7.1%YoY to4.8%YoY over the same period (see Figure 24). Moreover, in 2Q16, workers at 7% of the 300SMEs CRR tracks got lower wages on a YoY basis and more than 27% of the firms did not raisewages.

Macro Man's cynicism with the Fed (in his above comment) is quite apt. However, I think most here fail to see what is really happening. It's become clear to me that 'monetary stimulus' is just a politically-correct version of a soft-default on outstanding debt. There is going to be a global reset, and a destruction of private wealth on a hitherto unforeseen scale.

@anon 9:20, I know a lot of people don't agree but one vote for the global default theory here. I also happen to think this is connected to geopolitical events (e.g. the manufactured issues of "navigational freedom" in South China Sea and cornering of China, I mean really, would China stop it's own export trade there? bollox). Is it also a coincidence that there were suggestions flying around that US should annul Chinese debt holdings. As long as you have a navy and a bunch of puppets to threaten with there's no fear of retaliation.

Anon 9.43Thank you for your 'tip'. I can't decipher the timeline clearly on your charts so have no idea of timeframe. In that context may I respectfully point out that advising when to buy has a profitable "mega trader" is not actually very useful. It's not even the major part of a strategy unless you are saying you never need to sell ? In which case you're simply advocating some form of trend following omitting the exit trigger. At which point I would suggest that for about 2 years the SPX has ranged 1900 to 2100 with fades on both top and bottom.In the event you are suggesting buy for a daily gain or some such then I need to reiterate I don't day trade. Historically , I have been a value investor which makes me ,if anything, a trend follower ,but in the last 2 to 3 years I have brought in range trading has I became unsatisfied with valuations. At this juncture the range trading has saved the portfolio from stagnation which in a low growth environment I am completely satisfied by. If you have a big pot then even a modest % return is more than adequate. Leveraging that to day trading is simply unnecessary and to be frank having played that game in the 90's I'm in no hurry to repeat the experience.

I think this is probably correct. Been at this a long time, and Lefty at least, knows my story about investing. I won't bore the room with it.

But it is pretty obvious that ZIRP/NIRP/ and QE are not of benefit for the people outside of government. I am not sure the central banks can raise now due to the massive amount of credit/debt that has been created since 2008. 7 year car payments. 20 trillion in US debt. Pension plans on a road to nowhere. Massive college debt and ACA debt on the young earners.

There is nothing much I can do about this...I'm as deep in the Matrix as everyone else. But I am absolutely certain this ends very badly this time. And I for one, don't understand how we didn't opt for a recession/reset and opted instead for this mind-numbing slow death of western financial strength...

Anon 2:24 "Fed's targets for core cpi, unemployment, and real gdp/potential have all been exceeded."

If true, then rates will be raised. The only problem is we are not "in the room". We know the narrative but we lack real information...I.E the real reason why central bankers and the Fed remain on this path a full 7 years since the financial meltdown.

One psychologist who works with climate scientists told Richardson they suffer from “pre-traumatic stress,” the overwhelming sense of anger, panic, and “obsessive-intrusive thoughts” that results when your work every day is to chart a planetary future that looks increasingly apocalyptic.

“pre-traumatic stress,” I love the days we live in where everything is referred to in some pseudo clinical manner that attaches to it that sense that it is more right because of the terminology used to describe it. Was a time this was just called what it is, Anxiety ! Nothing very sexy about that though is there.That's just for us dinosaurs now.

CBs are gushing liquidity that is being channeled by rotten government policy into sewers of health care, higher ed, RE, stocks, bonds, etc. where you are seeing rampant inflation/bubbles. Thanks CBs and government for truly fcking up our world.

AMP,I have to say there are times when I suspect you have been inhaling the lighter fluid,BUT then you occasionally you surprise me as you did today. Very close call ,well done. Pick your trades just has well and we will be taking your calls !

celeriac - I am in the muddle along camp in the medium term, so its not clear to me any immediate asset valuation reset is in the offing, just more rotation - I think we are currently in a very long step 1, lasting many years, which will see a slow rise in wages that outpaces sales increases, leading to margin compression at most firms with big gains to the amazons - this trend will be ameliorated by automation, but the latter will simply be redistributionist in that the displaced workers will reduce consumer demand and/or accelerate the trend to online shopping. Winners and losers.

Step 2 kind of depends on how central banks, investors and politicians react in step 1 - given headline inflation will merely go sideways and/or rise very slowly, CBs will stay ZIRPish which will lead to a madder and madder scramble for yield for asset gatherers to keep their jobs, but the crowded nature of this could lead to major accidents along the way. Politicians will focus inwards and pretend to be protectionist leading to even slower corporate growth, and bouts of fiscal stimulus may happen but only when they have political cover because of a recession or market weakness.

Step 3 could be the return of inflation when people least expect it, probably coinciding with another commodity super cycle (albeit the commodities themselves may be different, maybe more lithium, solar panels, or natural gas and less oil and coal) and a bear market in long dated bonds. This is when conventional portfolio asset valuations may hit distressed levels.

None of this is particularly insightful I realize - the trick for us is to get the length of these stages right! I have no idea if step 3 is 15 or 5 years away, but I am 100% sure the key to unraveling equities long term is to be found in the global govt bond markets, and not in some book by warren buffett.

Take a step back and look the real long term :wealth destruction phases have always happened, you can't have infinite growth in a world with limited ressources, so you need destruction phases.WW1 and 2 made the 20st century rate of growth possible.So either with a serious war or a big reset, wealth will be destructed, that's the way the system work and it should'nt take a genius to understand this.

When people discuss a wealth reset through destruction it appears to me what they are really discussing is how right or wrong we are in the future in terms of the fiscal and monetary policy mix. The more right this is the smoother any wealth destruction might become with the ultimate ideal being a barley perceptible loss of real value to nominal over many many years. For that scenario you'd need to a long term swap via the inflation channel where capital values were outstripped by rises in disposable income levels. The latter being impacted via fiscal policy switches probably via tax laws.In essence though I think the answer to the question about how long such cycles might be is simply unanswerable. The only way to cope being to set out your mile markers at which you would be prepared to reallocate the portfolio in accordance with the latest data readings. No different really to any accountancy based control program which assesses mainly what we know as opposed to what we don't know and can only guess about.

Certainly makes one wonder in the light of contrary JYen strength post policy and Bund auction outcomes in negative territory .By the same token I have no idea how fiscal stimulus in just about any format gets past the Bundesbank. That's like Hiroshima laying out the welcome mat for the nuclear bomb.So ,if central banks have been playing according to the Rolling Stones when it comes to managing growth and misallocation levels then perhaps it's time to play a new record.Rolling Stones according to the UK Stay campaign, or risk on JBTD it goes ;

Time is on my side, yes it is.Time is on my side, yes it is.Now you all were saying that you want to be freeBut you'll come runnin' back (I said you would baby), You'll come runnin' back (like I told you so many times before),You'll come runnin' back to me.

Time is on my side, yes it is.Time is on my side, yes it is.You're searching for good times but just wait and see,You'll come runnin' back (I said you would darling), You'll come runnin back (Spent the rest of life with ya baby),You'll come runnin' back to me.

Go ahead baby, go ahead, go ahead and light up the town!And baby, do anything your heart desiresRemember, I'll always be around.And I know, I know like I told you so many times beforeYou're gonna come back,Yeah you're going to come back babyKnockin', knockin' right on my door.

Time is on my side, yes it is.Time is on my side, yes it is.'Cause I got the real love, the kind that you need.You'll come runnin' back (I knew you would one day), You'll come runnin' back (Baby I told you before),You'll come runnin' back to me.

Time, time, time is on my side, yes it is.Time, time, time is on my side, yes it is. Time, time, time is on my side

All recessions since 1948 started with an average growth rate greater than the current 1.20% rate.

“There are only three instances where the 1-year growth rate was below the current level and recession did not occur. In the two most recent instances (2011/2012), weak growth was met with renewed rounds of extraordinary stimulus in the form of quantitative easing (QE).

“Only 18% of all observations going back to 1948 are below the current 1.20% level.

“Of that 18%, 94% occurred during or within a quarter of a recession.”

....Hussy this morning...if you young pups don't see how devastating this year after year slow growth is, it is because you ain't looking...However, I will grant the rebuttal I see coming..."Yeah, but Hussman's statistics are not from a time of eternal ZIRP.." Point ceded in advance...

anon 2:24, cheers for the indonesia insight. I never said the economy was booming. Indeed I was just looking at the brazilian banks latest results and they were hardly positive, even if you squinted hard enough. But hot equity money wants to go there, so they buy domestic banks ..

We are at a momentous position in financial markets. Equity indexes are poised to go MASSIVELY higher. The only sensible thing here in my opinion is to borrow as much money as humanely possible and put it all into stocks.

abee i am completely flat Europe - it has bled so much and ive been so lucky on the downside that i felt i ought not to insist - so it would support your thesis of a break out or at least relative strength vs. others

i went short SPX last Friday - i may be damned if i don't see 2100 again in my lifetime.

BBG: "Last month, yields on U.S. 10-year notes turned negative for Japanese buyers who pay to eliminate currency fluctuations from their returns, something that hasn’t happened since the financial crisis. It’s even worse for euro-based investors, who are locking in sub-zero returns on Treasuries for the first time in history."

@Nico & Abee. AM a bit surprised to see you think a break out is on the cards. I've been looking for it in Dax and ESX for the last week. The volumes have been terrible for 3 weeks now and today was the worst. I think Emini was lowest so far this year outside of public holidays. The dax has been dragged up IMHO and had the opportunity to blow weak shorts out of it. Then again, I'm always a day or two early to these trades...

Fwiw I have no position in EU, just looking. Sentiment for EU stocks is crap, and global equity markets here are just playing grind up mode, so I'm looking for a catch up trade. Tricky trade to play (this year especially) but sometimes it works like a charm.

I've been looking at SXNE, stoxx industrials index, solid relative strength, good foward EPS and top of the range...thinking it might be a sign of strength for the index just like industrials led the US markets higher a few months ago

300/500 SP500 stocks are above the index average. Most US companies are out-performing. We are well into a recovery, supported by central bank stimulus. There is no underlying mess. Global debt will converted int 50-100yr bonds (so effectively written off) and equities will continue to rise for the next 5-10 years. This is the biggest bull market of our generation, only people are too stupid to see it.

this bear bashing is kinda good because it keeps even less people from shorting and crowding those trades - noone here even mentions TIMEFRAME - if you don't know your timeframe, go with the trend or you'll get poor. if your timeframe is known and pertinent you can perfectly short against a trend. In a bull market, with right timing, you make money and you make money REAL fast when you short. I hate to brag but i made little north than one million euro on Brexit and 2/3 of the position was added the evening of the vote. Both shorts on Eurex (Estoxx futures) and on Chicago (GBPUSD futures) We are talking about a 10 hour position here, not 10 months or ten years.

it is a matter of lifestyle in the end: i personally would be dead bored buying in March 2009 and still trailing my profit today. It is not all about the money, it is about the kick you get out of trading. I like to make week-long campaign max, then go flat and enjoy other things. Then go back at it. Most long only people i know (equities, convertible bonds etc) are bored shitless in their job. Investing, rather than trading. They just show up every day of the year to do 1/2 hours of analysis if that, and check that all is well. If all is not well (temporary dip) they just say 'well it will get back up'. And they are paid ridiculous management fees to do so.

Most of my actuary school alumni are bond investors and they've had the best 20 years of their life. At what merit though? The long only investment community is the most overly paid bunch in the history of mankind. I have nothing against them. I bought internet stocks in 1999 and held for 8 months and found those 8 months the most boring and unfair period of a lifetime, just sitting on your ass and watch your profit grow.

To follow a trend, you need the intelligence of a sheep. And overall, be it investing or trading or speculating, the job we do is the most useless job in human history, The complicate investment vehicles and shell companies, all that financial and fiscal engineering has maximised financial risk and fraud throughout the globe and 2007 (CDOs) is being repeated as we speak (zero yielding bonds)

Would you like a awfully great example, soon to be a movie? the 1 MDB saga which in term of wealth 'extraction' beats every idiotic corporate buyback of the last two years

even if you looted a Spanish gallion for gold in the 1600s, or attacked a train in the 1900s, you could not rob that much from so many in so little time ever until they invented modern capital markets.

Nico,I always read your posts with great interest and I believe you are one of the key contributors to this wonderful blog (beside being a very good trader).I am a long only active asset manager and the only thing I can say is that an institutional long only active mandate 40% global stocks / 60% govvies has a management fee at or below 10 bps per annum (no perf. fee) .... which isn't exactly an "insane" amount of money in my book.Moreover, if you have large diversified portfolios, the daily maintainance is quite extensive and certainly takes more than 1/2 hour a day.Of course I don't want to be here some sort of white knight of long only active managers, which, let's face it, it is a specie in extintion, but I just wanted to "remettre l'eglise aux milieu du village".

AL - that was a funny exchange - actually, any exchange with nico on one side is guaranteed to be. If I were you I'd just have replied with - 'BAAAAA'!!

It's no secret that volumes are plumbing the lows, even by august standards - however, the interesting thing to me, and one I can't reproduce unfortunately, is that dark pool vs exchange volumes are making all time highs for major equity ETFs, something that was not the case last year. If anyone can shed light on why, please do.

"The complicate investment vehicles and shell companies, all that financial and fiscal engineering has maximised financial risk and fraud throughout the globe and 2007 (CDOs) is being repeated as we speak (zero yielding bonds)" -

Fascinating comment. For those of us not trading, but write about it, would you volunteer to elaborate? In laymen terms for regular folks who don't understand finance? Hopefully not conspiracy-speak, there's already too much of that already.

of course writing a quick comment can't really be an essay - i had mutual funds and more so hedge funds in mind. hedge funds whose mandate it is to sort of beat a benchmark - just a lot of lazy cats out there paid handsomely

most of my summer is spend repairing engines and doing electric works and all kind of things and i find professional mechanics and electro-engineers to be 10 times smarter and astute than most traders around the globe. But they only make 1% of their money, i am not sure how we made all that possible

anon 2:27PM

in 2007 CDOs were all the rage and everyone leveraged up to their eyeballs because noone believed US housing prices could go down. There is abundant coverage of that global illusion (the documentary Insider, the movie The Big Short etc)

in 2016 zero yield or negative govies are all the rage because everyone thinks they can find a greater fool who believes central banks will always have their back more than they ever believed themselves. It pretty much amounts to that.

hence why 2016 is much more dangerous - before, in normal yields days, bond holders would hold their investment to maturity no matter if yields would pick up at some point, they stil got their money back + coupons

today you only hold your bond as a speculative asset, hoping that others fool will buy after you. What does it mean in layman terms? the day yields pick up and bonds go down, bond speculators will just DUMP their position like they would dump stocks at a stop level just because you know, there was never a coupon in the first place and the 'investment' was losing money from day one (negative interest)

so one day you can expect the bond crash to make any little crash you have seen, 2008 included. look like a cute baby falling on his diaper.

I love this board. In brief the consensus view is: stocks always go up so we will short them. Hahaha. Those of you not yet out of a job will soon be joining the other half of posters here who are unemployed.

Nico is wrong about bonds. Central Banks will just increase asset purchases. The Fed owns 70% of this market, and will soon follow the BOJ into owning 100% of it. The bond maturities will just be changed to indefinite. problem solved. No crash, and SPX at 5000.

Nico you've been parroting on about Armageddon since 2008. No doubt you will eventually time one correction in stocks (even a broken clock is right once a day). However your permabear thesis has been proven to be wrong pretty much every day of every week of every year for the past 8 years. Stick to the sailing, let us guys do the trading ok? ;)

LB has other things to do than sit around reading the insights of the ACTs [anonymous commentary tools] and watching this sh*t drift upwards every day. There isn't very much money to be made on either side of spoos at the moment, we'll be looking for a few short-term FX trades for the time being and keeping half an eye on oil, where we remain bearish - but recognize that the dynamics of a squeeze are in play at the moment.

Unfortunately Nico, It won't just be the bond holders if or when your scenario comes to pass. As we all know spread counts and if bonds reverse in a really harmful way that spread is going to felt through every part of the market. I don't know if this scenario is inevitable ,but to avoid it you really need to have a lot of faith that central banks can manouver a goldilocks recovery in growth. Personally, I don't have that faith. If I ever did I was certainly decades younger and greener than I am now.

Well, i like and respect Nico's posts/views. I once called him perma bear and he took that offensive. Well, just one comment Nico, your Brexit call was pure casino call in my book, you won that but nevertheless it is casino move.

Nico, I'd much rather have held AMZN, GOOGL, FB, APPL etc and did nothing for the past 5 years than trying to time the markets, pick spots etc. Of course its hindsight knowledge that those companies would be the champions and stocks would do amazing (vs some of my spectacular picks like SUNE & OCN). yes trading is exciting, but its also mentally exhausting, for me at least

The problem is that you dont want to use a lot of leverage with Buy& Hold vs trading where you can use futures and FX to capitalize on small moves. So it really depends where you are in life. If you are rich already then buy and hold is fine but if you are trying to make a stake, you need to trade, IMO

European banks have recovered since the week of the ECB meeting and the subsequent stress tests, this is clear. What is less obvious is whether this relief rally represents a true measure of investor faith in a return to profitability for these banks or whether this is yet another bout of short covering and profit taking, of the type we have witnessed many times. In this context, watching the share price of DBK is probably all one needs to do. It is up 10% off the lows, but is set to encounter multiple resistance levels at around €12.50 and €13. Just as Greek/Spanish 10y rates used to be the thing you looked at every day during the European bond crisis, now it is the share price of Deutsche Bank.

Punters have short memories. When the time comes, a lot of money will be lost very quickly by a lot of people and they will simply be frozen and unable to respond to the event, so conditioned have they become to trust in central bank largesse and JBTFD investing, and to ignore all other parameters such as valuations and earnings. Some of us remember the early months of 2009 when the market went down every day, for no other reason than that people could no longer take the pain and were unwilling to believe that the sun would rise in the morning. It was a good time to buy.

Retract the security blanket from punters (and machines) who are completely dependent on QE and margin debt and you will force them to look at an earnings recession. The resulting market dysphoria is likely to induce a true economic recession. The unknown unknown (to use a Rumsfeldism) is whether Dame Janet waits for something in the system to break before reducing the flow rate of the heroin drip, or whether the Fed decides to get ever-so-slightly ahead of a projected uptick in wage inflation, by signaling in even the smallest way that monetary policy may be tightened in the months and years ahead.

fully agree abee.. just do both - "investing" and trading. I have my long-term ETF portfolio which gets rebalanced from time to time but is buy-and-hold and then I run my trading account on IB where it's much more short term oriented, more markets and long or short of course. more fun is the trading book, but it can be much more exhausting as well of course, leaving aside that I trade at my normal job as well.

and I agree to mi pa too ... doubling up before Brexit is nothing to brag about (unless you had superior information to the whole market which I doubt). it is a punt, but no trading... you can as well just put your money on red.

it was not casino nor insider information and even less about bragging thereafter. If you guys had done more personal homework and stopped reading the press the Brexit punt was a classic example of fading market psychology once you read that BOOKIES were let in the picture and relayed by Fox news and cnbc. Some incredibly clever guys punted a few hundred thousands at online bookies to influence the listed future markets and make tens of millions there, in the process. The zig zag (leave, then remain, then leave) produced was a very clear feat of sentiment manipulation . If you did not see that manipulation, fine, but do not call fading the manipulation a casino move when it was simply smart

i am not sure why people need to fight in here, everyone ought to try to learn from others' experience and ignore whatever is not of their liking. We'll never meet in real life, so it's all about sharing information here and perhaps have a bit of fun

I'd second Nico on the bookies odds influencing markets for Brexit vote. In the final days right up to the Sunderland results, Futures markets were reacting to bookies odds which, when you think about it, is crazy. A tiny, illiquid market herding around trillions of $ in assets. Couldn't figure out why the market was so certain right into the close of electronic trading. (because Jo Cox was murdered?) No risk priced in at all. What was the upside to Remain? I didn't have the risk profile to take it on overnight but planned on selling any remain vote on Cash open.

fwiw I'm getting more sceptical on the markets... was bullish most of the time and made some good money . but first it was a US rally, then Emerging markets joined and now Europe is getting bought. all this without a real retracement. maybe it's the little volume and not many people on the offer but it feels stretched. I cannot see a good reason for a sell-off however, too. There isn't much on the political/economical agenda and nowcast economic models have improved. so neutral in total. maybe I add some SPX puts, there seems to be lots of supply in those lately.

It all seems a bit awfully complacent with this low volume market innit. Just for example I see a lot of "quality" extra-EU export firms made better results but apparently this still, in many cases, occurred as a result of cost cutting. Surely we are nearing the point when this "innovation" will run itself out. It seems in many industrial sectors new orders growth especially in far east Asia has stalled and is about to roll over. It might take a while for this to become apparent and relevant though as these macro thingies do take their sweet time to work their way, first we need to get rolling over new orders, then burn the order book with sales, which in many cases have increased and hence should burn up faster.

I don't remember who asked but fading nzdusd post nfp weakness around 0.71 was the easiest fx play for this start of week, bought some euros yesterday toodollar strenght is a myth in 2016 it's down against jpy, aud, cad, nzd, em currencies, flat against euro, granted there is gpb weakness but for non dollar related causes.

you guys keep an eye on LIBOR last time it hit 80bps was back in 2008 all is not so well under the funding carpet and henner imho this is about the become the main issue for capital markets

another point from the Shot today: the Bank of England's QE ran into trouble trying to purchase bonds because institutional investors (including corporate pensions and insurance firms) have nothing to replace these securities with - even if they make a significant profit. These organizations need a yield that covers their liabilities and cash is not going to get them there.

An interesting, and fair take, on negative yielding assets. No better than gold now as they don't produce anything. In fact, worse as you don't start off in the hole with gold compared to negative yields.

"JPMorgan's Oksana Aronov. Investors should now think of a negative-yielding bond as a commodity, remembering Warren Buffett's assertion that with commodities you are simply betting on what someone else might pay for them at some future moment, said Aronov"

Anon 12:30 - I think that's nonsense. There's a big big difference between a -ve yielding bond and a commodity. The bond will almost certainly be redeemed at par at a known point in time. Your ultimate exposure is to the issuer, not to the "what someone else might pay for them at some future moment". Both the amount and the time are known in advance.

@Anon13:30 & Celeriac1972 - Celeriac is quite right, a bond is not the same as a commodity even in this context, you are guaranteed to lose money on bonds, whereas you will be guaranteed to make money on commodities once the central bank bs collapses our financial system.

Given that a significant amount of debt is priced off of LIBOR and that it is now higher then UST out to 3y, I'm not sure it's raise is a none issue, a cause for panic, no. But definitely something to watch.

Correct, the Govt bond market is an absolute ponzi, luckily enough due to ridiculous regs nowadays, there is a captive market (demand) hence price inelasticity ; not to mention a big buyer of last resort (for now at least). To be honest one can only think of the -ve yield as a fee for parking money (supposedly risk free!). All fun and games until someone loses an eye.

Another interesting aspect of the LIBOR rise could be its impact on absolute return (& similar) funds that set their targets with reference to LIBOR. There are several in the UK (SL GARS alone has £26bn) although these will be using GBP Libor as a benchmark. Are there similar funds in the US? If so, their task just got somewhat tougher...

@Nico/@Celeriac/@JohnL funnily enough, the quickest way to stop LIBOR-OIS from widening would be for the fed to raise rates and make it not a one way bet - the odds of that happening are zero of course.I am actually less sure of the actual severity of the issue than the fact that it has the right ingredients to form a narrative WMD - we will see - lets just remind ourselves its (US equities specifically) a price is news market if I ever saw one..

The US MM fund narrative fits what we can see happening with LIBOR, but is it enough in itself to explain all of the rise or are there other factors? I think this is a very tough question to answer at this point.

No doubt one of the many partners in 20/20 Hindsight Capital will be along at the appropriate time to explain it all to us...

"The Bank of England’s QE ran into trouble trying to purchase bonds because institutional investors (including corporate pensions and insurance firms) have nothing to replace these securities with – even if they make a significant profit. These organizations need a yield that covers their liabilities and cash is not going to get them there."

A close of the VIX outside of the 2.0 Bollinger Band (20-day SMA)A close back inside the 2.0 BB. This issues the signal.A higher close (sell) or lower close (buy) than the close of the day back inside the 2.0 BB – this confirms the signal.

Once you get those three events a major reversal usually occurs within the next week. Why is it called a VIX Sell Signal? Because the ‘sell’ part refers to equities – if we were all anal retentive or Swiss then it would be called VIX Buy signal, but alas we now live in an analog gender fluid world and precise naming rules only apply Thursdays between 7:00 and 9:00.

Meh, my Dax breakout call is looking iffy... Europe has a nice habit of making breakout tops..But as long as S&P is above 2100 hard to get really bearish IMO.. along with CRB Raw/XME /Basic materials doing well...

"today you only hold your bond as a speculative asset, hoping that others fool will buy after you. What does it mean in layman terms? the day yields pick up and bonds go down, bond speculators will just DUMP their position like they would dump stocks at a stop level just because you know, there was never a coupon in the first place and the 'investment' was losing money from day one (negative interest)"

In your view, does this apply to USTs that still offer a bit of yield? Or, would this be contagious to USTs once the 0% and negative yield bonds get dumped.

johno, just to pick your brain a bit.strictly macro...although it is tempting to buy sek at the top of the range, I would caution on that. We have been trying to leg into it for the past few months but macro is not quite supporting. CB's fx assumption is much stronger and they will certainly welcome some weakness to help on the inflation front, which has been slowly creeping to target but investment and exports are looking shaky going forward. Growth likely to be lowered at the next meeting. Another strange development is their very tight labor market...wage growth picking up, time to normalize you ask? Nope, wage growth collapsing. We do not yet understand what the reason is. Do not want to push my mantra but stagflation written all over the wall there as well...look at neighbour Norway. CPI consistently over target and they are unable to hike. CBs will opt for above target inflation almost in all cases.

Shorting HUF is also tempting but both the positive level and dynamics of the current account will be an obstacle. In its desire for weaker FX the CB will flood the domestic market with liquidity using their new "magic switch" starting September but they are almost zero bound. Furthermore, we found that when rates approach zero bound, monetary policy when targeting FX (dont they all?) in a strong current account environment, will be ineffective. Japan looks like a poster boy for that experiment.

While waiting for my martini, I had a cursory look at BBG headlines. The most telling one is that Pimco boosted USTs to the most in 2 years...

I really mean I knew that when they bragged last week that USTs are rich. They did exactly the same last year bragging about a life-time opportunity to short bunds just before bunds started the face-ripping rally.

I spent a busy day last Friday buying USTs, LQD, HYG, EMB on the NFP-induced drop (anyway who would care about this random number apart from newspaper reporters?)

In the hindsight it was all so easy... The point is that there is a colossal value in USTs at these yields, you just need to determinedly stick to it. The determination is what separates a gambler from the winner...

That why I am travelling to buy a penthouse in Dubai while the gambler is glued to his screen trying to cover margin calls from UST shorts.

Re SEK, I'm not keen on range-trading, but I decided to give it a go Aug 2 with EURSEK having just reversed at 9.60. I could set a very tight stop. A regression model on rate differentials also showed EURSEK expensive there. Regarding the Riksbank, I would assume they continue pushing out their first hike, as they have done the last years. The STINA forwards are already reflecting that view. I'm not sure I quite follow you on the currency. The July 6 Monetary Policy Report shows the KIX at annual averages of 109.8 and 107.8 for '16 and '17 and currently it's at 112.1, so there's room for the currency to appreciate (lower KIX) from here before it's challenging the Riksbank's projections. As for the economy, Sweden has had the best post-GFC growth in G10, the output gap should be moving positive, the inflation trend is positive and the CPIF inflation prints have been meeting Riksbank projections more-or-less for a while now, after a long streak of misses. That's an alternative way of looking at it. Also, with the depo rate at -0.5% and QE ongoing, the Riksbank has already done everything save intervene in the currency (arguably in the same camp as EUR or JPY, also running a CA surplus). The flow picture is something I wish I had a clue about here, e.g. how FX flows are related to the yield curve (steepest swap curve in G10). There was also an interesting correlation with the SPX I mentioned sometime back, which made me wonder about equity FX-hedging flows. Anyway, my rational was top of range, tight stop (so skewed risk/reward), attractive on rate differentials, and some room before I thought Riksbank would fight the trade.

Re HUF, it's more the PLN leg I'm excited about. PLNHUF is cheap on rate differentials and I figured the CHF-mortgage proposal, along with the hawkish Polish CB, could close it. I also have PLN against EUR, because I didn't want too big a bet against HUF, but that does introduce long-EM risk. As you point out, there are some NBH measures that should compress HUF FX implied yields. We're already seeing that.

Anon @10:19, right you were! You'll see from my post earlier in the day, I came round to your view and took off my NZD exposure before the meeting. Seemed like too high a bar for the RBNZ to jump, on closer examination.

@johno, nice if my view was usefull, I still see nzdusd 0.74/75 and audusd 0.78/79 before what could be the biggest corrections since april on these pairs, eurusd could visit 1.1350 area.Still like audnzd long too, but hard to know when the bottoming process will resolve itself as it probably needs a divergence between rba and rbnz policy.

Johno, thanks for the insights! Do you trade all FX or mostly EU? Any thoughts on BRL and MXN. MXN I cant figure out if the market is slow or I am missing something

I'm not a big FX trader but thinking of dabbling in AUDCAD here, range trading any thoughts from the board. I'm more positive on oil on a 3 year view vs iron ore

EEM is 25% Financials, 25% Technology. So as long as Nasdaq and XLF are going up, party on. IN terms of valuation, we are getting near top of PE bands in NDX though BKX still has about another 2 turns to go..Industrials already at 17x... hard to see it going much higher, IMO

Omega/Lee Cooperman in his last letter said they were bullish on the markets not so much bc they see great price gains but bc they dont see a recession. They are not bullish on the actual price appreciation but on the length/duration of the current bull still has more to go.

Re MXN, perhaps I can offer some perspectives. To start, note that Mexico has the highest unidentified capital outflows (reported as errors and omissions) in EM, at around 2% of GDP. If you look at FX implied yields versus current account plus error and omissions, MXN screens as having quite low carry for the level of CAD+EO (at around 5%). Mexico's CAD+EO is financed primarily with portfolio flows, but foreign positioning in MBONOs is already very high now and the fiscal situation with oil here raises questions. This also points to a bit of policy dilemma for Mexico - one reason foreigners are happy to own so much of the local bond market is because the curve is so steep, they can hedge the FX and still get a pickup versus treasuries. So, if the central bank hikes rates they might actually cause a foreign withdrawal from their bond market. Cyclically, there's some concern whether consumption can continue to diverge from manufacturing so strikingly. Mexican export growth, given the FX depreciation, has been dismal. That autos are 36% of Mexican exports and US auto sales have flattened out may explain this partly. Trump has also been a concern, perhaps less so now. Finally, perhaps related to my first point, the long high carry EM short MXN trade has been popular, so that's probably weighed on MXN.

BRL I'm cautious about here. The central bank doesn't want it stronger and can unwind its swap book to lean against it. Cyclically, Brazil has hit bottom, but eventually growth will be necessary to push equities much higher. The market anticipates Temer introducing and passing lots of reforms after Rousseff is impeached, but I'd like to see it to believe it. Already there have been some setbacks to passing reforms, which markets have dismissed.

Re AUDCAD, I'm a bit bullish AUD here. It looks cheap versus rates and terms of trade, but looked cheap like that back in April and terms of trade, i.e. crashing iron ore prices, closed the gap that time. CAD looks fair here. A maybe immaterial fact, but interesting nevertheless, Vancouver implemented a 15% tax on foreign purchases of real estate. Is it the beginning of the end for the Canadian real estate bubble?

These days I wonder whether receiving rates isn't the better trade in EM than being long their currencies. It's an imperfect proxy (has FX and credit exposures too), but look at EMLC. I'm no technician, but doesn't that look interesting? Also, did anyone see BlackRock's head of EM fixed income's comments on a "great migration" to EM local currency bonds in the FT earlier this week? "This is not just the tactical guys.... This is pension funds, sovereign wealth funds. The big, big guys are starting to move." Anyone following this thread with more specific expressions of this theme than +EMLC, your comments are most welcome!

LB is back in the Hammock, where everyone should spend August. We are literally doing nothing but watching twice a day for half an hour. Things we are watching with interest - and waiting for an entry point over the next week or two:

1) Short WTI. No position at present. We covered our shorts days ago. At the moment we are watching another squeeze that is engineered by and solely for the benefit of a few entities, e.g. Glencore, some of the large commodity hedge funds. The glut in crude and the products continues, and once these guys have exited their longs and sold to Tiny Punters, then supply data and a firmer dollar will contribute to another leg lower.

2) Short CADUSD. Persistently low oil prices and a hissing sound from the Vancouver housing bubble are a big red warning flag for the Loonie. This one remains our favorite FX punt, and it will pay off handsomely for those who are willing to be patient. CAD is really going to plummet by December.

3) Long UUP. Eventually the recognition that the Fed remains on a different flight path from other central banks will sink in, and although the speed of the ascent of US rates will be slow, the move in the dollar may be rapid.

4) Short IWM. Once we see oil fading again and persistent under-performance in small caps, we will return to this.

5) Short FXI. China will eventually have to fix the yuan lower. That will mark the end of the long and somewhat surprising run up in emerging markets. When BlackRock talks up EMLC, are they simply talking their book and selling it on to the Not Very Bright guys [who got a job managing money b/c they knew some one and are now desperately seeking yield] at Real Money inc.? We think so. Long EMLC is a popular USD carry trade, as Johno points out, but we think the timing is wrong here.

6) Long vol. There are some alarming statistics on Tiny Punters and large traders alike both selling and shorting volatility with leverage here - and to a degree that hasn't been seen in decades, if ever. What could go wrong for Tiny Punters? Like Nico we are looking at VIX signals, such as a steady decline in the steepness of the curve.

Regarding your views on USD, to what extent do you think the elections play in tempering the market/Fed's view on rate hikes over the FOMC meetings before the election? The markets talk about this goldilocks situation, which seems very fragile to me but it's simply been grinding along on this precarious view. I guess a related question would be what entry point would you think makes sense on the DXY?

Would you long vol at the front end or near the back end of the curve? I've only been seeing an increase in vol steepness along the term structure over the past while, not decrease.

Its impressive that you know so much about many different countries. I guess its easier to follow 20-30 main FX countries vs many different stocks/sectors that I currently have spurious knowledge about but I've found that FX the factors that drive prices tends to be dynamic depending what part of the cycle/situation you are in whereas with equities the drivers are pretty much static. earnings & growth along with company competitive position/mgmt/quality as an overlay

For EM carry, we use EDD, higher carry vs EML. Have also dabbled in EDF but at a premium now. DSL and AWF are decent alternative, with lots of HY exposure as well. EMCB as well

The vol curve is very steep at the front. Less steep than three weeks ago but still back to 2012 levels. Further back, quite normal compared to the last three years. So for long VIX futures, November and later are less unacceptable than first two months.

VIX, at <12, is very very low though, along with realized vol. Short-dated puts?...

Seems best way to buy vol here is just set out sell levels below in your preferred and keep scaling in if they hit.

How far do long bonds drop from here. Back to 125 on TLT? And if it gets anywhere close to that, do stocks float or sink?

Thanks for the comments and questions. Yes, the vol curve still too steep at the front, and that's why we are still just watching - but that can change quickly of course with spot VIX at such low levels. Anon @1:02, thanks for the comments on TLT, we have also been bearish the Long Bond for the short-term here (lower highs and lower lows) and have been eyeing the 130 level and the 130-135 range; of course an overshoot below this is possible.

Our reading is that at 125 the TLT would be a great buy and at that level the yield on the Long Bond makes a lot more sense than Unicorns, mall REITs, European shit with negative yields and pixie dust tech stocks. So we'd love for that to happen, and like others [Gundlach, Dalio etc..] we would probably be very interested even before TLT reaches that level.

LB,USD/CAN , not seeing the edge on a chart at all. At 1.30 upside and downside don't offer much RR. Now if the Fed pulls away or OIL get's a supply accord and it drops to 1.20 giving up 50% of the gain from the post 2011 basing range then that's a different story. As it stands though you really need to see Oil fall apart or the FED moving to convert that 1.30 flag into a failed pattern.

Abee: short AUD/CAD: Very attractive and I have an oversize position from 1.01 with stoploss at 1.02. Adding further position now at 0.9995 The fundamental drivers are also in favour of a move lower namely the iron ore/oil ratio should correct and AUD.CAD has diverged from rate differentials in the last 3 months and should reattach itself at some stage.

A further move up the range could occur if there is more weak data from Canada/Canada recession again. Still the last time this happened (late last year) AUD.CAD didn't breach 1.02. My plan is to take profit around 0.95. I suspect one day, the Australian economy will go into recession and it will break to the downside and head to 0.85. Just on a rate differential basis, AUD still has much further easing potential (from 1.5%) than CAD (0.5%).

Shitty US retail sales and SPX barely budges. Wow, really is Teflon atm. One good thing about AUD.CAD is it gets you away from dollar directionality when the dollar is moving as it is. Also keeps me from silly impulses to short SPX again.

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